The cost of Brexit – the effects on the economy and UK businesses

Brexit and the impact on the UK businesses

There’s no denying that Brexit is already having an impact on the UK economy. Its implications reach into almost every business sector, from manufacturing and tourism to retail. Britain’s decision to leave the EU has led to economic uncertainty, slow and unstable growth, and a weak pound – some businesses are already collapsing due to their models no longer being viable.

The broad view

Let’s start with the negative effects. November 2017 saw the Bank of England raise interest rates for the first time in ten years, with an expectation of having to do so twice more before the end of 2020. The broad economic outlook has been fairly poor, with Britain moving from one of the best to one of the worst performing countries in the G7.

The Autumn Budget presented data that showed families were feeling the pinch in 2017 – the biggest pinch, in fact, since the 1950s. Minimal income growth and increasing pressure on household spending has meant many are cutting back on luxuries. This has caused the restaurant industry in particular to experience decline.

Meanwhile, business investment was subdued throughout 2017. The Bank of England expects that investment will sit at around 25 percent lower in 2019 compared to where it would have been if the UK was remaining in the EU.

Medical science

According to research by the British Medical Association and other organisations, funding for medical research could be threatened by Brexit. The EU currently provides funding to scientists in the UK who are conducting clinical trials and researching new drugs; this is expected to be withdrawn when Britain leaves the EU. Tellingly, the Netherlands was awarded the right to host the European Medicines Agency, which until last November was based in London.

Manufacturing

The manufacturing industry could be one of the worst impacted sectors, particularly if free movement of labour is restricted. It has been noted by the media that the entry of migrant workers into the country fell dramatically in 2017, and reports suggest that as many as 200,000 jobs could be lost should Britain lose access to the single market.

A brighter outlook

The news, thankfully, is not all bad. Inflation has dropped and earnings have picked up a little since March 2018, easing the pressure (albeit slightly) on households. Real earnings rose for the first time in a year in April, with the impact of the sudden drop in the value of the pound beginning to fade.

Meanwhile, the Bank of England is debating whether to raise the cost of borrowing above 0.5 percent for the first time since the recession. According to the Bank, it’s a move that’s overdue and could help the economy to recover from the tribulations of its immediate post-vote state.

Financial advice

Businesses and individuals who are concerned about the impact of Brexit on their own investments and deals should seek the help of a financial advisor to ensure they are prepared for the changes in the economy.